Competition to further optimize the industry’s ecology, see how head players Swiggy and Zomato deal with

The authors Sindhu Kashyap and Thimmaya Poojary, original title: The foodtech battle heats up as Amazon readies to take on Swiggy and Zomato

Summary of Points:

  • India’s take-away market is reviving, Amazon’s entry will optimize the ecology: lower platform commission rates, rely on its e-commerce system and logistics department’s innovative operating model to ease supply shortages in India

  • The large discount model has triggered a collective protest from the restaurant. Will the “burning money war” in the second half of the take-off take-off take place as scheduled?

In recent days, the Indian take-away market is not too peaceful: first, restaurant owners and Zomato and other take-away application companies have launched a fierce battle on the sharp discount model; later, Amazon has entered the food technology field and become the biggest variable in the competitive landscape. A group of take-away food and beverage technology startups have long been eyeing the multi-billion dollar Indian takeaway market. According to a report by the business consulting firm Market Research Future, the total value of the Indian takeaway market will reach $17 billion by 2023, with an annual growth rate of 16%.

At present, Swiggy and Zomato have become the two giants in the Indian take-away market, and other players including Uber Eat and Foodpanda are also entering the trot. What is curious is why is Amazon going to enter such a highly competitive market?

People familiar with developments and industry companies that have had exchanges with Amazon have said that this global online retailer may take a very different approach from other competitors. “Unlike traditional catering and distribution companies, Amazon may adopt a very different and personalized approach on its platform,” said one company executive.

According to the source, Amazon is unlikely to set up its own kitchen network, but instead cooperate with the merchants that supply these foods. At the moment, Amazon has started to contact the restaurant, the platform commission rate is only 6-7% of the order amount, far lower than the commission rate of Swiggy and Zomato 15%-20%. A restaurant owner said: “By joining Amazon, we can choose to refuse exclusive contracts and expand our business.” It is said that Amazon will first launch a take-out service in Bangalore during the Diwali festival.Orders can be placed through Prime Now.

Economics 101: Competitive market efficiency is high

Multiple sources indicate that Amazon has negotiated with Ola’s Foodpanda and is also evaluating other potential partners. Foodpanda has recently adjusted its business to focus on selling its own brands. Amazon’s entry is bound to incite the current segmentation pattern, but perhaps all market participants will benefit from it.

Rohan Agarwal, business manager of analyst firm RedSeer Consultancy, said: “For any business ecosystem, it is always beneficial to increase the number of participants. Market competition, cooperative restaurants and end consumers can get better service. Competition The supplier system will be optimized to increase industry efficiency and thus truly fill the gap in the market.” Amazon’s entry may also drive industry innovation, especially in product positioning. “This provides space for testing new forms and creating new brands, and consumers will benefit from it,” investors said.

The addition of Amazon does make a sigh of relief for independent restaurants that continue to squeeze profits on the distribution platform. “Given the increasing volume of orders on the take-out platform, restaurants are also catching up with demand and increasing daily raw material purchases. However, the commission rate (that is, the amount paid to Swiggy) is constantly increasing. After a certain percentage, you are equivalent to reversing customers. Have dinner,” said a restaurant owner who asked not to be named.

Objectively, online take-out platforms are still valuable to restaurants, and some restaurants receive nearly 5,000 orders per month from each takeaway platform.

The old model has been eliminated, and operational issues have received much attention

The food technology industry has received much attention since its birth: In 2015, the food technology industry ushered in a peak financing period. At that time, almost all companies were raising funds, lest they fall behind. In 2016-2017, the industry was in turmoil. Startups with good financing, such as Tinyowl, have closed down. Just one year after the investment slowed down, food technology startups once again became the focus of the spotlight. Industry competition is no longer limited to the top ten big cities, but has already extended to the top 100 cities.

How is the long-term operation? Rohan explained that the past set may no longer apply. “The most important thing is to find an operational solution that fits the realities of these markets and regions. This is an “operation-intensive” market, and many companies have to outsource some of their business. But for e-commerce systems and logistics like Amazon. For the players in the department, it is very simple to enter the market. All they have to do is use the existing resources.” He added that the advantage of entering the market lately is that “target consumers have become accustomed to using this service”.

New market participants also offer new optionsChoose. Another restaurant owner working with the takeaway platform believes that Amazon’s entry can break the current monopoly or duopoly.

The European and American markets have been hitting each other, and the Indian market can be ashamed of the snow

Considering that this global online retail giant has hit the wall in the European and American takeaway markets, the decision to enter the Indian market is worth pondering.

In June of this year, Amazon shut down its take-out delivery service in the United States. Deliveroo, a former take-out platform invested in Europe, also went out of business. Despite this, there are still many people who are optimistic about the prospects of Amazon in India. “India is a tight supply market, which is the most distinctive difference between the Indian takeaway market and its players,” said an investor who asked not to be named.

Opening a restaurant requires high capital on the site and equipment, and operating expenses are also high. The only way to continue to make a profit is to increase sales, and many restaurant owners are hoping that the take-away platform will send them a large number of orders.

“This is why the shared kitchen concept like Swiggy Access is so popular. India’s restaurant coverage is not as high as in the US and even Southeast Asia, and the take-away culture is just emerging, which makes take-away distribution very profitable. ,” one analyst explained.

“burning money war” is on the horizon

To get a slice of the Indian takeaway market, participants need to have a good net worth. Both Zomato and Swiggy belong to the unicorn company and have received a lot of money through financing. Amazon’s participation in the war will make this financing war more and more intense.

Many reports indicate that Zomato and Swiggy spend between $30 and $40 million per month on discounts, business expansion and logistics. At present, Zomato’s business covers 500 cities, with orders exceeding one million, while Swiggy’s orders are maintained at around 1.2 million.

Uber CEO Dara Khosrowshahi said the competition in the Indian takeaway market was “very intense”. Uber expects to inject $90 million to $120 million from Uber Eats to support its future growth.

Edit | Guo Chen@出海

图 | Oriental IC

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